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Journal of Economic Perspectives: Vol. 22 No. 2 (Spring 2008)

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Taking the Pulse of the Economy: Measuring GDP

Article Citation

Landefeld, J. Steven, Eugene P. Seskin, and Barbara M. Fraumeni. 2008. "Taking the Pulse of the Economy: Measuring GDP." Journal of Economic Perspectives, 22(2): 193-216.

DOI: 10.1257/jep.22.2.193

Abstract

This article provides a broad overview of the measurement techniques used in estimating GDP and the national accounts in the United States. In the United States, the GDP and the national accounts estimates are fundamentally based on detailed economic census data and other information that is available only once every five years. The challenge lies in developing a framework and methods that take these economic census data and combine them using a mosaic of monthly, quarterly, and annual economic indicators to produce quarterly and annual GDP estimates. One problem is that the other economic indicators that are used to extrapolate GDP in between the five-year economic census data -- such as retail sales, housing starts, and manufacturers shipments of capital goods -- are often collected for purposes other than estimating GDP and may embody definitions that differ from those used in the national accounts. Another problem is some data are simply not available for the earlier estimates in the reporting process. For the initial monthly estimates of GDP, data on about 25 percent of GDP -- especially in the service sector -- are not available, and so these sectors of the economy are estimated based on past trends and whatever related data are available. The initial monthly GDP estimates based on these extrapolations are revised as more complete data become available In producing the national accounts estimates, the Bureau of Economic Analysis attempts to strike a balance between accuracy and timeliness so that the estimates can be used to monitor real overall economic growth and inflation, as well as major sectors of interest.

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Authors

Landefeld, J. Steven (US Department of Commerce)
Seskin, Eugene P. (US Department of Commerce)
Fraumeni, Barbara M. (U Southern Maine)

JEL Classifications

E01: Measurement and Data on National Income and Product Accounts and Wealth
E20: Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)

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